Tag Archives: Federal Reserve System

By Ambrose Evans-Pritchard – The diverging fortunes of the QE bloc and the EMU bloc prove beyond doubt that monetary stimulus packs a powerful punch.

America has this year weathered the most drastic austerity cuts since demobilisation at the end of the Korean War in the 1950s. Net fiscal tightening has been 2.5pc of GDP, yet the economy has muddled through. The Fed‘s $85bn monthly bond purchases – soon to be $75bn – have blunted the shock. more> http://tinyurl.com/kgzrut8

English: The Marriner S. Eccles Federal Reserve Board Building (commonly known as the Eccles Building or Federal Reserve Building) located at 20th Street & Constitution Avenue, NW in the Foggy Bottom neighborhood of Washington, D.C. Designed by architect Paul Philippe Cret in 1935, construction of the Art Deco building was completed in 1937. Its 2009 property value is $109,029,200.
(Photo credit: Wikipedia)

By Jonathan Spicer and Jason Lange – The Fed’s extraordinary money-printing has helped drive stocks to record highs and sparked sharp gyrations in foreign currencies, including a drop in emerging markets earlier this year as investors anticipated an end to the easing.

The central bank‘s asset purchase programs, a centerpiece of its crisis-era policy, have left it holding roughly $4 trillion of bonds, and the path it must follow in dialing it down is rife with numerous risks, including the possibility of higher-than-targeted interest rates and a loss of investor confidence. more> http://tinyurl.com/ks8t5m4

By Matt Levine – The Fed is having trouble influencing short-term rates because banks are not the seamless transition mechanism you might once have expected. Nobody trusts the banks, so they can’t increase their borrowing in the unsecured market just by raising the price.

Regulation makes the banks so creaky and complicated that they actually don’t want to make risk-free money by borrowing all they can from the fed funds market and lending to the Fed at IOER rates, because it would mess them up for capital or whatever.

By By Matthew C. Klein – When confronted with concerns about people struggling to live off fixed incomes, Yellen agreed that “low interest rates harm savers, it’s absolutely true.” Harming at least some savers, however, may be part of the plan, at least if Yellen agrees with Charles Evans, the president of the Federal Reserve Bank of Chicago. He has argued that the threat of wealth confiscation by negative interest rates is necessary to restore spending and “risk-taking” back to “normal levels.”

These admissions suggest the Fed’s leaders believe that the central bank boosts the economy chiefly by enriching certain people in the hope that they go out and spend their newfound wealth.